Let's Talk Taxes

Sean McLaughlin
February 22, 2022

No, it’s not April 15th just yet. But I’m getting into that zone where I need to start sending relevant info to my accountant to get the ball rolling for my 2021 tax return.

I hate that I have to farm out my tax return preparation to a professional in order to get them done. I wish the US tax code wasn’t the way it was – who doesn’t?

But let me relate a little story to you that might get your mind right about whether or not to go it alone when doing your taxes…

I don’t remember the year, but it was somewhere around 2003-2004 when I first moved to Chicago. I had been using an accounting firm to prepare my tax returns since I began trading in 1998. But this year, I thought to myself:

“Sean, you’re smart. You’re college-educated. You almost minored in accounting, and you had straight A’s in all your accounting classes. You should be able to handle the filing of your own taxes!”

So I don’t remember if it was out of an act of curiosity, boredom, or just trying to pinch a penny, but I decided that year I’d prepare my own taxes.

I read all the official instruction manuals provided by the IRS. I gathered all my necessary trading documents. And I followed every procedure to a T. I left no i’s undotted, no t’s uncrossed.

After all the work was completed I had determined that I owed the IRS somewhere in the neighborhood of $4,000. Never happy about owing the IRS money, I nonetheless accepted it. It felt right. It felt fair. And I was prepared to send the return and my money off.

But before licking the stamps, on a lark, I decided maybe I should have an accountant ALSO prepare my taxes to compare notes. Let’s see how well I did?

I could have used my old Accountant from back in Florida (where I had moved from and who I used for years). But since I was new in town, I reached out to a new trader friend who’d been trading in Chicago as a local on the floor of the CME for many, many years and asked him if he could recommend any local accountants in Chicago who handle traders.

He made a recommendation. I made a phone call and shortly after I was sending all the relevant information – all the same info I used in preparing my taxes myself – to the new accounting firm. They had a few follow-up questions just to make sure they weren’t missing anything. And then they told me they’d have my returns completed within a couple of weeks.

While waiting it out, I was tempted a couple of times to send in the return I had already completed along with the $4,000 check – just to get it off my plate so I wouldn’t have to think about it anymore.

Well… the wait was worth it.

When I received the completed returns prepared by the Accountant, instead of owing the IRS $4,000 as I had determined and was completely ok with, they showed me that the IRS owed ME $6,000!!! This was a $10k swing in my favor!

I was met with mixed emotions about the situation.

On the one hand, I was overjoyed about what felt like a lottery win! It felt like free money!

On the other, I was completely pissed off that I was so wrong in my calculations. It just fed my angst and anger about how overly complicated our tax code is. If a college-educated man who works with numbers for a living can’t properly figure out his tax bill, how does the average American fare under this system? I was furious.

Unfortunately, I don’t have any power to change the system, so fighting against it is energy I’ll never ever get back.

So let me save you the trouble and some money: If you’re an active trader or investor, you owe it to yourself, your family, and your future finances to have your taxes prepared by a tax professional. Yes, it’ll cost some money. But I promise your accountant will earn his or her keep – not only in actual dollars but in peace of mind that it was done right.

~ @chicagosean

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